What Is the Potential of Food in Online Retailing
Around the World?  

By John Karolefski


Internet grocery shopping around the world is rising, says a new study, but its market share remains weak. Fifty percent of the average store-based grocery basket comes from food sales. By contrast, food contributes only 36 percent of the world’s average online grocery shop in value terms.

The report on global trends in packaged food was compiled by Euromonitor International for SIAL Paris, the gigantic food exhibition held in October.

“The slow take-off in online grocery shopping in many Western markets has been well documented,” the report states. “Reasons bridge both supply and demand sides. Consumers are skeptical regarding product quality and convenience, whilst for retailers internet delivery services remain expensive and logistically difficult to implement. Additionally, the recent rise of discounters, with limited online options, has inhibited online shopping.”

Meanwhile, online grocery shopping has captured a “chunk” of the retail landscape, according to the report. South Korea, China and the United Kingdom posted respective 10 percent, 6 percent and 6 percent of grocery sales going through online platforms in 2015. In China, with sales via internet retailing jumped by 5 percentage points between 2010 and 2015, and is predicted to grow to 9 percent by 2019.

“Yet the numbers generally remain relatively unimpressive for many countries. By 2019, many markets which are conducive to internet retailing growth will see sales hover around 3-4 percent of total grocery shopping,” the report states.
 
Here are the key takeaways from the study:

Food shopping follows the same habits online and offline in Western Europe: Purchases from bricks-and-mortar chains’ online services appear to mirror offline ones, with staple foods accounting for the greatest share of both food baskets. In Western European countries, internet sales are not undermining in-store sales at present.

Consumers will still buy food impulsively, but will opt for different products online: Online shopping fundamentally changes the nature of how products are bought and consumed. This greatly impacts many products, especially snacks. While many of these rely on impulse, impulse can thrive online, in different ways.

Brand sites must be used in Asia Pacific and Middle East: Buying packaged food appeals to wealthy consumers in many emerging markets. Those affording these branded goods buy because of their international reputation and perception of quality and safety. Tthe onus will be on food makers to launch websites via portals such as Tmall and Taobao to appeal to such consumers.

Product mix will blend value for money and exclusive online options: Smaller snacking products will be difficult to sell online because they are not popular with retailers due to their low cost, and subsequently more difficult to buy online or simply unavailable. Consumers don’t want these products online anyway. Larger pack sizes appeal to both retailers and shoppers online, and so manufacturers should take notice.

Impulsivity will be re-imagined: Impulse purchases online can be powerful online. Companies need to work with retailers to maximize the visibility of their products online and increase the possible interactions shoppers can have with their products. Services such as Amazon Dash have real potential as impulse channels.

Interacting with Amazon and Google important in US: US grocery retailers have so far failed to deliver when it comes to online shopping. Amazon and Google have both identified a gap in the US. With their online expertise as better than those of bricks-and-mortars rivals, their importance in the future of US grocery retailing should not be underestimated. These retailers will spur internet grocery shopping, and manufacturers should boost their presence on these platforms.

                                                                        December 2016
INTERNATIONAL